Ohio National Life Faces Multiple Federal Lawsuits Over Plans to End Trail Commissions
November 22, 2018 by Thomas Harman
CINCINNATI – Ohio National Life Insurance Co. is facing lawsuits seeking to have a federal court prevent the company from implementing plans to end payment of trail commissions on certain variable annuity policies later this year.
The complaints were filed by Arkansas-based independent broker/dealer Veritas Independent Partners and a licensed security representative named Lance Browning. Both cases were recently filed in the U.S. District Court, Southern District of Ohio.
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Ohio National sent a letter to Veritas and to other independent broker/dealers, including other members of the class-action lawsuit, which said termination of all selling agreements between Ohio National and its affiliates would take effect Dec. 12, 2018, at which time all individual trail compensation would cease.
Trail commissions are paid annually to advisers to provide an incentive to review the client policy and provide advice.
Veritas seeks to retain the right to trail commissions under the selling agreement.
Veritas asked the court to declare before and after the selling agreement was terminated, Ohio National was obligated to pay all trail commissions to Veritas and others in the class until a contract is surrendered or annuitized. Veritas argues in a separate count the failure to pay commissions is a breach of contract. Also, the complaint said Ohio National should be liable to Veritas in an amount to be determined by the court, along with costs, interest and attorney’s fees.
Unless Veritas and the class gain relief from Ohio National’s alleged conduct, they “will continue to suffer irreparable harm, including loss of goodwill, loss of reputation and financial losses that are presently not calculable,” the complaint said.
“The case is of significant importance to the hundreds of independent broker/dealers and their representatives who invested significant time and resources to building a book of business based on their understanding they had a long-term agreement with Ohio National Financial to honor that investment,” said Veritas counsel Geoffrey Moul in an email.
Ohio National does not comment on pending litigation, said Angela Meehan, vice president, corporate marketing.
According to the Veritas complaint, Ohio National recently concluded the guaranteed minimum income benefit rider annuity contracts were unprofitable and moved to exit as many existing contracts as possible. In instances where Ohio National could not exit the contracts, the insurer allegedly stopped payment of commissions to Veritas, the complaint said.
Ohio National allegedly induced sales of its policies through the promise of annual, recurring commissions to broker/dealers and, by extension, securities representatives. Ohio National’s refusal to pay the commissions cuts off customers from receiving financial advice about these policies from their financial advisers. “Ohio National is not allowed to do that,” Browning’s complaint said.
Earlier this year, Ohio National Financial Services said it would exit its annuities and retirement business beginning Sept. 15, shedding 300 jobs in doing so (Best’s News Service, Sept. 7, 2018).
Ohio National Life Insurance Co. and Ohio National Assurance Corp. both have current Best’s Financial Strength Ratings of A+ (Superior).
(By Thomas Harman, Washington Bureau manager, BestWeek: Tom.Harman@ambest.com)
